The short answer: six kinds of employee expense, and only when every condition for that kind is met. Since 1 October 2026, UAE companies can recover input VAT on goods and services given to employees at no charge to them only in the cases the Federal Tax Authority has now listed: transport, food and drink at remote locations, work-related accommodation, temporary housing for new joiners, phones and home internet, and business parking. A clause in an employment contract or a line in an HR policy is no longer enough on its own. Benefits that labour law makes mandatory and employee health insurance keep their own rules, and client entertainment stays blocked as before. What changes most is the evidence: each claim now has to show why it fits its case.
What changed, and when
| Date | Rule | What it means for expenses |
|---|---|---|
| 22 July 2026 | FTA Decision No. 13 of 2026 issued | Suppliers and supplies must be verified before input tax is deducted |
| 1 September 2026 | Cabinet Decision No. 149 of 2026 amends the VAT Executive Regulation | Employee benefits recoverable only in the cases and conditions the FTA sets; a coming limit on cash-paid supplies |
| 9 September 2026 | FTA Decision No. 17 of 2026 issued, published on 28 September | The six cases and their conditions |
| 1 October 2026 | All three take effect | Expenses incurred from this date follow the new rules |
| 28 November 2026 | Return due for tax periods ending 31 October | The first return that includes October’s expenses |
The six cases and their conditions
Decision No. 17 applies to goods and services an employer buys for employees to use without paying for them, under a contractual obligation or a documented policy. Every condition listed for a case must be met.
| Case | Conditions |
|---|---|
| Transport | Only between home and work, to clients’ premises or for other job duties; no personal use; the employee cannot choose a cash allowance instead |
| Food and drink | The employee lives in a remote or isolated area with no cooking facilities or nearby restaurants; linked to the work or residence period the job requires; no cash alternative |
| Accommodation | Needed because the work requires living near the workplace, site or client; not part of ordinary pay or benefits; for the employee alone, unless it is their permanent home near the site; basic, without significant recreational elements; no cash alternative |
| Housing for new joiners | No longer than 30 days, and in line with the job and basic needs |
| Phones, airtime, data and home internet | Needed for the job, including remote work or contact outside hours; personal use only incidental; a written usage policy with consequences for misuse; reasonable monitoring, with records |
| Parking | Solely for business, such as a client visit; a written policy on when parking is reimbursed and who approves it; a receipt showing the date, time, fee and VAT |
The cash alternative is the condition most likely to catch a company out. If an employee can take a transport, meal or housing allowance in place of the service, the VAT on that service is not recoverable, whatever the policy says. Accommodation has a second hurdle: Cabinet Decision No. 149 removed it from the labour law route unless a decision or directive of the Ministry of Human Resources and Emiratisation requires it.
Two more rules that reach the expense report
Cash payments
The amended regulation now blocks input tax on any supply above a value set by the Minister of Finance when it is paid, or meant to be paid, in cash. As of 6 November 2026 that value had not been published, and the FTA’s legislation page lists no such decision. Decision No. 13 already expects payment by electronic means: where cash is used, there must be a documented commercial reason, the payment must sit within the legal thresholds and it must be easy to verify.
Checks on suppliers
Decision No. 13 asks companies to verify a supplier at the first dealing and again every twelve months, and to verify each supply. Purchases under AED 10,000 before VAT are exempt from these checks. The exemption falls away once a company buys more than AED 100,000 from one supplier over twelve months, a level the regular hotel, airline or travel agency of a busy team can pass. Above AED 375,000, the company also needs a UAE bank’s written confirmation that the supplier holds an account. The checks, the evidence and a policy naming who runs them must all be kept.
The receipt rules are unchanged but matter more now. A registered business may accept a simplified tax invoice for a purchase of up to AED 10,000. It must show the words “Tax Invoice”, the supplier’s name, address and tax registration number, the date, a description, and the total and tax in dirhams. Above that amount, a full tax invoice carrying the company’s own name and registration number is needed.
Seven changes to make before the first return
- Map every expense type to a case. List each reimbursement and benefit you pay, match it to one of the six cases or to another rule, and mark the rest as not recoverable.
- Remove or record cash alternatives. Where employees can take an allowance instead of transport, meals or housing, decide whether to keep that choice, knowing it blocks recovery on the service.
- Rewrite the policy by case. Add a phone and internet usage policy with monitoring, a parking reimbursement policy with its approver, and a 30-day limit on new joiners’ housing.
- Make the claim form ask the question. Require the case, the business purpose and, where it applies, the client or site, so the reason is recorded with the claim rather than reconstructed for an audit.
- Capture the receipt fields. Read the supplier’s registration number, date, time and VAT from each receipt, and ask for a full tax invoice above AED 10,000.
- Flag cash and track suppliers. Ask for a reason on every cash claim, be ready to block recovery above the coming limit, and report spend per supplier against AED 100,000 and AED 375,000.
- Split the VAT before it reaches the ledger. Post recoverable and non-recoverable VAT separately from the expense system, so the return does not depend on someone sorting claims by hand.
Where SBConnects fits. Expense Management reads the merchant, amount and tax from a photographed receipt, checks each claim against your policy, flags duplicates and moves the claim through approval to payment. Approval workflows can be set by department, amount or your own rules, approvers can respond by WhatsApp or email, corporate card transactions sync and are matched automatically, and VAT reconciliation validates the tax details on each one. Reports by employee, department and trip download in one click, and approved claims flow to your HRMS, ERP, accounting and payroll systems. Trips booked through Business Travel are booked within policy, and travel management companies can offer the same flow to their corporate clients through Corporate Travel & Expense. SoftwareBiz sets it up with your policy and approval chain, trains your finance team and supports it after go-live, in one to eight weeks depending on configuration and modules.
What to do this month
Pull October’s expense claims, sort them by the six cases, and check how many would fail a condition: a cash allowance offered, no usage policy, a parking receipt without the time or VAT. That count shows how much input tax is at risk before the return is filed. The same records will meet the next change soon: the largest businesses start exchanging structured e-invoices on 1 January 2027, set out in our UAE e-invoicing guide.
